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Seanad Éireann debate -
Wednesday, 19 Apr 1978

Vol. 88 No. 9

Landlord and Tenant (Ground Rents) Bill, 1977: Committee Stage.

Question proposed: "That section 1 stand part of the Bill."

Section 1 is the definition section. I hope the Minister will comment on the questions concerning the definition of the word "lease" and the consequences of that definition that were raised in the other House by Deputy O'Keeffe. The Minister for Justice agreed to consider these matters before the debate in the Seanad and to give us his views on them.

What is the precise point?

The question of the definition of the word "lease" was debated in the other House.

It relates to the 1967 Act.

The leases that we are concerned about here relate back to section 4 of that Act.

Is it not the 1958 Act?

Any reference to ground rent leases in this Bill relates back to the definition section of the 1958 Act.

There were other matters raised in the debate in the other House which the Minister said he would look at. They were raised in the context that they might be loopholes and the Minister was to look at them to see if they would have that effect. We would like to know if he conveyed to the Minister here present what his views on it were.

As far as the definition section is concerned we were quite happy. It relates back to the definitions contained in the 1958 and 1967 Acts. I am looking at the 1958 Act here where we have the definition of building leases under section 4. In the 1967 Act we have the definition of a ground rent lease. It seems to be quite watertight as it stands. It relates back to specific sections in the two Acts I mentioned.

In the Dáil the Minister for Justice agreed to consider, before the matter came before this House, whether a fee farm grant, a lease with a terminable annuity or a long lease with a large fine payable by instalments were included in the definition of "lease" and therefore would come within the terms of this Bill. There are a number of legal animals that one could use to get around the provisions of this Bill. Even though we are all in agreement that ground rents should be abolished, Members on this side of the House expressed reservations on the Second Stage of the Bill, saying that the method chosen, namely, the rendering void of any lease that contained a provision retaining a ground rent, was a dangerous method. We also feel that the definition of "lease" under the 1958 Act does not specifically include matters like a lease with a terminable annuity, a long lease where no ground rent is retained as such but in which when the lease is sold in the initial stage the purchaser pays a large fine or price for the lease and the price is payable by instalments. The instalments could not be regarded as an annuity or ground rent.

These matters were put before the Minister in the Dáil and he mentioned that he would consider them before they would come into this House. In fairness one should express regret that on the Second Stage of this Bill we had the Minister of State at the Department of Foreign Affairs and on Committee Stage we have the Minister for Fisheries on what is a very complex legal Bill. I wonder whom we will have on Report Stage. Perhaps the Taoiseach will honour the House with his presence.

I happened to bring the 1967 legislation through this House.

I have no doubt about that, but this is a very technical Bill and we are talking about technical points which will be difficult for the Minister unless he has spoken with the Minister for Justice about them. I have mentioned the three points and I would ask him to answer them.

Has the Minister had discussions with the Minister for Justice on these points?

I have had a full discussion with everybody concerned, both Minister and advisers, on the Bill, and there are two amendments, Nos. 11 and 12, which go to meet some of the points made by Senator Molony. In regard to the definition aspect I am quite satisfied we cannot do anything but tie in this legislation with the 1958 and 1967 Acts and relate it back to the 1931 Act. We have there a corpus of definition and case law, and in practical terms I do not see why we should go outside that umbrella of legislation, definition and case law on foot of that legislation. All we are doing in this section is relating back to the legislation I have referred to.

With respect to the Minister, I am not aware that there would be case law as such in the question of what a lease means. It is hardly relevant in this context if there is because the Bill before the House seeks to import into itself the definition of "lease" from the 1958 Act. The definition in that Act reads:

"lease" means an instrument in writing, whether under or not under seal, containing a contract of tenancy in respect of any land in consideration of a rent or return and shall include fee farm grant;

That is fine as far as it goes, but the point made in the other House which we are repeating here is that there could be other forms of legal instruments which would have all the characteristics of a lease but could fall outside that definition and consequently would not be caught by the Bill before the House. Examples of those would be where a lump consideration is payable by fine over a long number of years or where the payment could be expressed to be main rates, though that could conceivably be interpreted as a return and could fall within the definition, or again it could mean a terminable annuity.

The point we are making is that to rely merely on the definition of "lease" as contained in the Landlord and Tenant (Revisionary Leases) Act, 1958 does seem inadequate and leaves loopholes for people to devise legal instruments which would defeat the whole purpose of the Bill. It is not something I would shed any tears over as I will indicate later. Nevertheless, if the Bill is to go through in its present form it should be consistent and should do what it sets out to do, that is to ensure that there will be no loopholes for legal instruments which would have the effect of being leases but would not come within the definition of a lease as set out in the 1958 Act.

Some of what Senators are referring to here would be covered in the sister Bill, the Landlord and Tenant (Ground Rents) (No. 2) Bill which is before the Dáil at the moment. Hopefully when that is enacted, that, plus this instrument, plus the legislation referred to earlier, the 1931, 1958 and 1967 Acts, should comprehend all forms of ground rent leases and there should be total cover. There may not be, but this is as far as we can go in legislation I have referred to. We will have before this House shortly the second ground rents legislation in which other aspects will be covered, and some of what the two Senators have just said will be more relevant to a discussion on that Bill than on this one. We are talking here on foot of the corpus of legislation we have in regard to ground rents leases. We are proposing here to prohibit the creation of future leases in relation to the legislation we have. We are seeking in this legislation to do that much and no more.

We are all agreed that that is the purpose of the Bill, but that purpose will not be achieved if the definition of "lease" relied on to prohibit future leases is the one in the 1958 Act. I have given to the Minister indications of legal instruments which would not come within that definition but would have the effect of being leases and would thereby frustrate the intention of the Bill. Would the Minister say specifically that an instrument giving land to a person for 999 years for a consideration of £999 payable at £1 a year would be caught by the definition of the 1958 Act?

Which form of lease would the Senator describe that to be?

It is a legal instrument. It does not have to have any name on it.

It is a fee farm?

It is not. It is an instrument vesting property in the other party for 999 years in consideration of £999 to be paid at the rate of £1 per year.

That sounds like a lease.

It is not. The consideration would be expressed to be £999; the person receiving the consideration has decided to take it at the rate of £1 a year. These are the points made in the other House, and I am disappointed that the Minister——

I discussed this matter with the Minister for Justice, and we cannot comprehend every conceivable type of legal instrument such as the Senator is aware can exist. In 1966 and 1967 when the ground rents legislation was being piloted through the House one of the reasons why I did not bring in this legislation then was that it could not have been comprehensive enough. You cannot bring a comprehensive measure that will totally and absolutely close all legal loopholes to conveyancers with regard to the creation of leases of all sorts and sizes.

The two Senators, as lawyers, are well aware of the truth of what I am saying. All we can do is close certain loopholes within the structure of the existing legislation, where there are certain definitions of leases acknowledged and understood, and deal with them on that basis. I would not for a moment pretend that this legislation, or the sister legislation, can comprehend the sort of ingenuity that can go into a conveyancer's work in producing leases in the future. That will be outside the scope of this legislation. What I am saying is that as a matter of practice and practicality, the reality of the situation is going to be that with this whole area precluded and rendered void in regard to the creation of ground rents, it will mean in practice that builders, developers and the conveyancers who work for them will no longer be in ground rent leaseholds as a practical business, and since the introduction by Senator Cooney of the previous legislation and the introduction of this legislation, there has been a dramatic fall in the creation of ground rents and the creation of leases based on ground rents.

The legislation is having what one might call a moral effect which is working out in practice. The value of ground rents has deteriorated. People are not creating ground rents and I want to say here in a public forum that I want to encourage that. In practice, what we are talking about here are academic areas where a conveyancer, for some reason or other that is not within my comprehension, wishes to create in a legal instrument some form of lease that would exempt his legal instrument and the lessor and the lessee concerned from the provisions of this legislation. That type of exceptional case—and I freely acknowledge that there will be exceptional cases of that kind devised by lawyers and conveyancers in the years ahead— cannot be dealt with in legislation. We cannot cover everything. What we are covering is what is acknowledged today by definition to be ground rents and leases giving rise to ground rents which we are now rendering void for the future.

In view of what the Minister says I would like to ask him specifically whether he is satisfied with two particular legal instruments which are not that unusual for conveyances and are used quite frequently. One is the instance that Seantor Cooney has already given, namely, a conveyance in which instance the fine or the capital sum paid for the conveyance is payable by instalments over a number of years, and the other is the conveyance which reserves a rent. There are conveyances that specifically reserve a rent. They are called a conveyance with a rent charge. I put it to the Minister that they are not included, and I would ask him to tell us whether in his view they are included in the provisions of this Bill.

We have had representations on the latter point with regard to rent charges. That is what I was referring to earlier when I mentioned the sister legislation. We hope to incorporate that in the subsequent Ground Rent Bill and will relate to the void provisions of this Bill. The type of lease the Senator just mentioned——

Are they excluded from the provisions of this Bill?

No, but they will be included in the other legislation and will relate back to this Bill as far as the voiding aspects are concerned.

This is very important. This Bill prohibits the creation of future instruments like this. The sister Bill, as the Minister calls it, gives tenants the right to purchase. It seems to me that this is the Bill in which any instrument which is to be prohibited in the future should be included. The other Bill is simply going to give the tenants or the lessees the right to buy them out.

Representation has come from Senator Alexis FitzGerald, and I am very glad to facilitate him in having this whole aspect of rent charges included in the No. 2 Bill. His office regards that as the more appropriate Bill, for technical reasons, to incorporate that type of lease, but it will relate back to this Bill. We can do that in a drafting way. The Senator can rest easy on that aspect. It will be incorporated. He has my assurance. I understand that Senator Alexis FitzGerald has been written to also that the point in regard to rent charge leases will be incorporated in the sister legislation by way of amendment either in the Dáil or the Seanad and will relate back to this Bill.

From what he says, we are agreed that the Minister concedes—it is not a concession in that sense but a matter of agreement between us—that there are legal instruments already in existence and others which possibly can be devised which will take them outside the scope of this Bill. There will be loopholes but we can only go so far in this Bill. I am glad to hear that from the Minister. That is precisely the point I was making—that the reliance on the definition of lease from the 1958 Act is too narrow and therefore permits these loopholes. In effect we are legislating for a situation that seeks by this Bill to prohibit the creation of future ground rents but does not avoid the situation where legal instruments with all the effects of the present leases reserving ground rents can be created in future.

We have included in section 3 one kind of lease beyond the 1967 categories. That was a result of the recommendation of the Landlord and Tenant Commission of the time, but that is a separate matter with which I will deal later. Broadly speaking, I agree with Senator Cooney. One cannot achieve total perfection in dealing with this matter. I did not bring in this in conjunction with the 1967 legislation because there are enormous difficulties in completely copperfastening this area. The legal minds of good conveyancers can devise all sorts of ways out. That has been the case for hundreds of years and will continue to be so.

We are agreed that there are loopholes and there have to be.

Question put and agreed to.
SECTION 2.

I move amendment No. 1:

In subsection (1), page 2, line 19 to delete "a lease of land" and substitute "any provision in a lease of land reserving a rent".

This amendment relates to the discussion we have just been having. The section as drafted makes the entire lease void and by doing that throws out not merely the provision relating to ground rents but also all the covenants that may be reserved. The main target of this legislation is the ground rent and it is agreed by all sides that we are after ground rents. As a secondary consideration we may or may not be after the covenants contained in the leases reserving the ground rents. As the Minister and I have just now agreed, we may get rid of the rent by using the definition of the 1958 Act, but because of the great variety of other legal instruments available to conveyancers we are not going to be able to get rid of the covenants.

Initially when I was proposing this measure last year I went along with the idea that the covenants too should be got rid of. The practical reason for that was that the controls imposed by covenants nowadays can be equally well imposed by planning controls, but on consideration and after talking to a number of people I am not so sure that that is so. If one considers the type of covenants that one gets in this type of lease—there are covenants to repair, covenants not to be a nuisance, covenants to use only for certain types of activity, covenants probably prohibiting certain business activities— planning controls can supplement those in so far as a change of user would require planning consent and a covenant requiring that the house be used for only one purpose could be supplanted successfully by a planning control. Covenants requiring maintenance of a common area in the middle of an estate, covenants requiring behaviour that will not be a nuisance and an annoyance to adjoining occupiers, or covenants requiring that premises be kept in a reasonable state of repair, can be very important in a large estate and I cannot see how they can be provided for by planning controls. There is nothing whatever in the planning board to stop a person from letting his house become disreputable. There is nothing in the planning board that would compel people to contribute to the keeping of the grass in the common area in the middle of the estate in a neat and tidy condition.

I am just a little apprehensive now and I concede to the Minister if he wants it that that is a change of mind on my part, that in throwing out the bath water of the ground rent we have thrown out the baby as well and that this is going too far. We have to look at it: are we achieving any practical result? Are we going to end covenants as such for all time? The Minister and I have just agreed that this will not happen because it would be possible to devise legal instruments which will avoid the imposition of a rent but will contain convenants. When the legal situation is such that covenants can be continued in exactly the same way as they are at the moment why should we seek to exclude them in a Bill that is going to be ineffective? Why not zone in on what has always been the common target, that is the ground rent as such? Covenants only came on to the scene because it was felt as a matter of drafting that we could not get at the ground rent unless we attacked the covenants as well. It is now clear that covenants can continue while ground rents can be outlawed.

Our first amendment is to delete the words "a lease of land" in the first line of section 2 and substitute for it "any provision in a lease of land reserving a rent". It appears to me that by making that change we are getting rid of the ground rents and retaining the right of a landlord to impose covenants. Even if we did not retain that right and let the Bill stand as the Minister and I have already agreed, the landlord can still impose covenants by using legal instruments of various kinds.

A second argument in favour of the amendment, apart from the items on the general principle with regard to covenants, is the fact that there could be difficulties for a person who takes a lease of land and the entire lease is void. That person could have contracted with a builder to erect a house and obtained bridging finance pending the completion of his title formalities. In the middle of this operation he finds that his lease is void. He then has to rely on subsection (4) and compel the lessor to give him the fee simple. Undoubtedly he can do that and in due course he can rectify his title. The point is how long will it take him to do all those things? Our amendment would avoid that difficulty. It would make only the reservation of the rent void while leaving the lease perfectly valid and the submission of title to the lending agency could go ahead and the bridging finance would be for a minimum period.

I ask the Minister to accept this amendment for the reasons, first, because of the loopholes in the definition section we are not going to be able to exclude covenants anyway, and therefore let us face up to the fact and get down to what is the common intention of us all—that is to exclude ground rents only; and, second, to avoid a situation where a prospective builder will find himself with a void lease and in difficulties with his lending agencies.

The whole thrust of this legislation as it affected the previous Government and affects this Government has been the strong public opinion that ground rent leases should be ended and here I disagree with Senator Cooney, not so much for the actual ground rent which in many cases is comparatively small, but for the strong feeling people had that they should own their own house and have full fee simple title to it. This was the motivation behind the public move in this direction. It was adopted by the previous Government, and has been adopted by this Government, as desirable.

When there is strong public feeling about a matter of that kind it is desirable that the Legislature should meet it, provided there is no harmful or serious financial side effects. There are not in this case. I believe house building and development can proceed apart from the ground rent system as such. This and the other legislation will see the end to it as a system and builders and developers will devise other ways, and are already devising other ways, of financing their developments. The people then will have the emotional and natural human satisfaction of owning their own dwellings. But I disagree with Senator Cooney here, I think the motivation in this instance on the part of people was to have the full fee simple right to own their own dwelling. This Bill is a response of the Legislature to that emotional need. That fee simple or desire to own their houses in the full sense, which the lawyers call the fee simple sense, comprehends covenants as well as rents.

I can think of a number of cases where the covenants concerned would be far more inhibiting in regard to one's sense of ownership of one's house than the rent, because as Senator Cooney and Senator Molony are well aware, the rents in many of these cases are not by any means onerous and there are cases where covenants could be onerous. That is on the technicalities of it. I prefer to deal with this matter mainly on the policy aspect. The policy of the legislation is basically diminished if this amendment is adopted because, as Senator Cooney admitted, it is the same policy he incorporated in his legislation. He has changed his mind since. That is his entitlement. I wish more politicians would change their minds. He had that policy incorporated in section 108 of the Landlord and Tenant Bill 1977 and we have incorporated the same principle here—the principle that we are meeting the social requirement of ownership in regard to one's dwelling. That sense of ownership in the full fee simple legal sense, comprehends the removal of covenants as well as rents. Having one rather than the other, as Senator Cooney suggests in this amendment, doing away with the rent aspect and retaining the covenant aspect, in my view would not meet this type of social requirement, wish or desire that has given rise to the legislation.

There are defects in the definition section. The loopholes which the definition section has, and which the Minister admits, permit the entity of all these covenants in the future. There will be no change for the purchasing tenant because of these loopholes.

I thought I met that point in my reply on section I when I emphasised that the effect of this legislation, and the subsequent sister legislation that is following, will be to accelerate what is already happening, that investors—and in this case we are merely talking about builders and developers in land—in land for the building and construction of houses and so on, are already getting out of——

With respect, ACRA, who might be expected to be in touch with this scene, say that since the legislation was first introduced over 6,000 new ground rents have been created. I do not know how hard a statistic that is but it is from a body involved in this particular scene.

That is one figure which I would dispute. We will be discussing this matter in later sections but all our information is to the contrary. The combination of the new purchase provisions in the sister legislation and the complete voiding of the creation of future ground rents in this legislation are leading to a diminution on the part of builders and developers investing in ground rents. This has been a gradual development since 1967, since the ground rent purchase provisions were first introduced. For obvious reasons, ground rents as a means of investment are not nearly as attractive as they were. The type of purchase terms obtaining today, which are well below the maximum level envisaged in that Act, seem to indicate that I am right. There has been a dramatic fall in financial terms of ground rents. It is our information that builders and developers who held these ground rents are now very anxious to dispose of them and cut their losses. The system as we know it is disappearing.

I disagree with what Senator Cooney says because, even though the definition in section I obviously cannot be fully watertight, there is no doubt that conveyancers can, if they want, devise legal instruments which can escape the consequences of the legislation and I have no doubt that the demand for them to do so will be substantially diminished. What we are talking about now is the academic capacity of conveyancers to devise legal instruments to exclude people from the ground rent void provisions. That is largely an academic exercise because the demand by clients for this to be done simply will not exist to any substantial extent.

I wonder, because it is a great protection for people to know that all the people in an estate are bound by covenants to keep the houses in proper condition, to maintain a proper standard of behaviour and to contribute to the general upkeep of the estate. Far from diminishing the value of the house or taking from the ownership, if the reality of ownership is the ability to get the full price of what you own, it seems to me it would enhance it by ensuring that the houses will not fall into disrepair, that the estate will not become disreputable and generally keep up the value of the house.

I feel from what the Minister is now arguing—he says it is an academic exercise and that people will not take legal instruments, containing covenants and avoiding the definition of leases in the 1958 Act—that people generally do not have a choice in this matter. In practice, the builder has a legal instrument for his entire estate and if his customers want a house in that estate they generally take it as it is. Many people are coming to realise that there are certain attractions in having covenants binding on all neighbours to ensure a high standard in the neighbourhood and thereby maintaining the value of the house. We are seeking to write into legislation a provision which the Minister and I have agreed on. We want something effective because of the loopholes arising from the Definition Act. That is bad law. There is a second side to the argument. This section as drafted, could lead to conveyancing difficulties.

I should like to make one point in relation to the creation of the 6,000 new leases retaining ground rents since this legislation first came before the Dáil. I was interested to hear from the Minister that his information says it has gone the other way. I should like to know the source of his information because, like him, when I saw the reference to 6,000 I was amazed. I should have thought most people would have seen the writing on the wall and said that leases were finished. I made inquiries and was given a very good reason why there were large numbers of leases being created. Contrary to what was promised in the Fianna Fáil manifesto, the Minister in this legislation is trying to prohibit the creation of future ground rents but he is not actually doing that. In the sister legislation, the Minister is, in effect, giving people the right to buy out their fee simple which is quite a different thing. If a house costs £14,000 and is advertised as such and somebody buys it on that basis having been told that his ground rent will be £30 or £40 a year, which is quite common nowadays, once the sister legislation is passed the effective change for that person is that he must pay an extra capital sum for his own house. That is the reason there have been 6,000 new leases created since this legislation was first put into effect. In fact, the opportunity has been given to builders to get an extra capital sum ultimately. As long as somebody chooses not to purchase the fee simple he will get his ground rent and thereafter if a tenant wants to buy out the fee simple he will have to pay a further capital sum to the landlord. That is the first point.

I should like to support what Senator Cooney says. We are all agreed that the retention of provisions providing for the payment of ground rent is wrong and reprehensible and should not be permitted. I do not accept what the Minister says in relation to the motive or strong feeling among people that they should own their houses. There is a strong feeling that they should own their own houses but that has come about through the feeling people had that when they had to pay ground rent they did not own their houses. That is a perfectly reasonable reaction.

We must not forget that the beautiful squares we see round the city, Merrion Square, Dartmouth Square and Fitzwilliam Square, all have a history in leaseholds. The reason they have remained so beautiful and were maintained so well is because of the existence of leaseholds. In this day and age when we have planning laws what do we see except the desecration of the squares which were created through leases and maintained through leases down through the years?

I sympathise very strongly with the policy of this Bill but when in the definition section the Minister is allowing a situation to develop in which the provisions of the Bill would be so easily got round by developers—we must remember that developers have the money to employ clever lawyers and they will do this where it suits them to do so—I wonder whether we should pick some other course altogether. What will happen is that when this legislation is passed we will sit back and say what great people we are, that we have this legislation on the Statute Book and that will not be worth the paper it is written on.

Senators cannot have it both ways. I am not making the point that this is perfect legislation covering every eventuality in this area. Eleven years ago I argued the points raised by the two Senators, that that was not practicable for the reason that, inevitably, there were ways out of it. That is a fact of life. All I am saying is that the Government are bringing in legislation to meet a social demand which does not have any harmful side effects in terms either of development or finance, and which was agreed to by all parties. The section we are now discussing is an exact replica of the section in the Bill sponsored by Senator Cooney. This section is concerned with the very principle of meeting this social demand by saying: "We will make void the creation of all ground rent leases in regard to dwellings. It does not have any bad side effects." It will not do any harm in the economic or developmental sense. It, along with the other legislation in the Dáil at present, will lead to a switch away from ground rents as an investment by builders and developers. The figure mentioned by ACRA is not soundly based and a spokesman for that organisation admitted this to my Department. He said they were mistaken in that estimation.

What is the correct figure?

We do not have a correct figure. We do not keep any statistics.

The Minister's figures are not soundly based either.

I am not talking about figures, I am talking about information. Apart from standing in here today for the Minister for Justice and relying on the officials, I know of an area of a constituency where a large proportion of the development took place on a ground rent basis. At the moment builders and developers are actuallly going to the people in order to get rid of the ground rent at terms like six and seven years' purchase and even less if they are done on a group basis. In an inflationary age such as this it is a crazy form of investment—looking at it from the economic point of view.

Are people buying them?

There is no market whatever.

It is no longer an issue.

This is my point. Any leases of a similar type such as Senator Cooney and Senator Molony mentioned earlier that might avoid or escape the definition provision in section I will be equally unpopular in the years ahead. Basically a ground rent is a long lease in which the tenant has the bricks and mortar and the land has a charge. I do not comprehend a situation where it will be economic or sensible for builders or developers to go in for this long lease type of arrangement. We are catching the existing arrangements that give rise to ground rents and it is largely academic to consider arrangements which may attempt to escape the definition provision.

I do not see the attraction in that type of investment or arrangement. Whereas conveyancers may technically be able to evade the provision I do not envisage clients asking them to do so. The reality is that we are now seeing the dying throes of this system of leaseholding. The strongest example of this system of leaseholding was the ground rent system in regard to long leases of land where the tenant held the bricks and mortar. We have a statutory definition on which we can rely and we are dealing in this legislation with that. It is limited to that, but we are swimming with the tide in this legislation, the tide which will see the disappearance of this type of long lease. It is obvious that one would not put money on a static lease in the sort of inflationary position which we have today. For that reason more than any other it is obviously not good business to invest in this type of leasing as far as the landlord is concerned.

Will the Minister deal with the other argument I made that as drafted subsection (1) can give rise to difficulties of title for the person building his house if he takes a lease which turns out to be void. There may be a long delay before he can utilise subsection (4) and compel the lessor to give him the fee simple. In the meantime he is on bridging finance. All that could be avoided if the amendment were accepted so that the lease would not be void but maybe the provision for the payment of rent would be void.

Are we meeting this in section 2 (4)?

No, we are curing the person's position and giving him the right to buy out the ground rent compulsorily at the expense of the lessor who gave him the void lease. The point I am making is that while that is happening this person is prejudiced by a void lease and is on a bridging loan with his builders shouting at him and he can be put in some financial difficulty. What I am suggesting to the Minister is that the amendment, as proposed by us, would avoid that situation because the person would have a lease that would be valid but the rent provision of it would be void, so that there would be no holdup in his title and the lending institution could take the lease from him. It would be a valid lease.

I see the Senator's point. In my view it is too great a breach of the principle of the legislation. Indeed, Senator Cooney saw that himself as Minister when bringing in his legislation. We are either bringing in this legislation or we are not.

I had not anybody in Opposition to point it out to me or I might have seen it.

I am not claiming that this is 100 per cent in the sense that there are all sorts of difficulties involved in it. There is general agreement to end all the hassle that has taken place and that the ground rents system should be voided in the future. If we are going to do it there is not much point from the policy point of view in doing half a job. If we deal with the rents alone and do not deal with the other encumbrances of the type such as the covenants then we are only doing half a job. In effect we are transferring the property in fee simple terms to the tenant concerned.

In practical and social terms I do not think that is on. That amounts to a breach of the underlying principle of the Bill, which is to transfer the ownership of the house to the tenant who is paying the ground rent and is subject to covenants and encumbrances that exist on his or her lease. That is what the Bill is doing under this section. That is what was done under Senator Cooney's Bill. We either adopt that principle or we have not a Bill at all.

The Minister says that no Bill can be 100 per cent perfect and I agree with him, but normally the imperfections manifest themselves afterwards when the Bill has been put into practice and is in use. Here we are on the Committee Stage of this Bill and the wide gaps are already staring us in the face.

There is a further point which I would like to make. We have gone through just a definition section and the first subsection of section 2 of the Bill. We have already found, and the Minister has very fairly admitted, that the Bill is riddled with loopholes. I wonder whether there is any point in allowing legislation like this to go onto our books or whether—as I said when speaking on the last section—we would be better off trying to find a more effective way of getting over the difficulty. Either we want the legislation or we do not. We want the purpose of it. None of us on this side of the House objects to the purposes of the legislation. We are all in agreement with the policy in so far as it is the prevention of the creation of future ground rents. I feel, as a lawyer and as a legislator, that we should not have legislation on our books that is bad, and this seems like legislation which will cause a lot of difficulties.

I would like to ask the Minister to answer the one specific question which Senator Cooney has raised: what will happen to the tenant, the person this Bill purports to protect, who takes a lease and starts to build a house and is out of pocket and is trying to provide a bank or a building society with security and who finds he has absolutely no title because his lease is void? I will grant that he has a right to acquire the fee simple, but the right to acquire something is not a title in root or any other form in law and a building society or bank will not accept it as such. That right to acquire will only be made into a substantive legal estate at such time as all the intermediate and the superior estates are brought together. Anybody who has any experience in the buying out of fee simples will be well aware that it sometimes takes years to get over that problem of actually getting in the ultimate legal estate, the fee simple itself, and that is the only right that has been given to a tenant. In my view it would be better if we said that the provision in the lease that retains the ground rent is void but the lease is not void. At least leave the person with some form of legal estate so as to ensure that he has some form of security to give to a lending agency.

We are broadening the debate away from the amendment. What Senator Molony stated is embodied in section 2 (4) dealing with an innocent purchaser. I would like to hear views on that and would possibly meet views on that particular aspect related to the point which Senator Molony made. We are discussing the amendment, which relates basically to confining the policy provision of section 2 to rent rather than lease so as to——

The amendment has the second effect of protecting the type of person mentioned by Senator Molony. If a person takes a lease under section 2 (1) which is afterwards void his remedy is then under subsection (4) to compel the lessor to give him the fee simple. The point we are making is that the length of time which may be involved in getting in the fee simple could seriously prejudice him in relation to his financial position. Obviously he will have made commitments to start his house and so on. We are saying that our amendment, in addition to having the other effect, will also have the effect of saving that person, because it would mean that the lease he would be getting would be valid but the provision with regard to ground rent only would be void.

The trouble about bringing that in under subsection (1) is that it would bring in a breach of the policy.

Can we get it in anywhere else?

We could have a discussion on it on subsection (4).

This is a very simple point and it comes under this amendment. If a person's lease is void he has no title at all. He has a right which we can discuss under subsection (4) but it is only a right. It is not a legal estate. It is nothing. A person is pressed by banks or building societies to provide more security than any reasonable person would insist on. We are leaving people, in a situation where they are already committed financially, without any security whatever, good, bad or indifferent. I accept that in the long term subsection (4) will be of help to them but only after a period during which they will have to pay enormous bridging interest. My concern is that these people may not be able to get money. I accept that the amendment goes against the policy of the Bill but I think this policy will have to be modified to suit this serious and difficult problem.

I am opposed to the amendment.

There is no point in sticking to a policy which will adversely affect citizens.

If Senators are becoming emotive about this I would ask them to state whether or not they are in favour of the prevention of future ground rents.

I am for the abolition of future ground rents, yes.

Our amendment does not contradict that principle. It is designed to achieve it.

Amendment put and declared lost.

I move amendment No. 2:

In subsection (1), page 2, line 20 after "Act" to insert "other than a lease made pursuant to a contract entered into before the passing of of this Act".

One of the problems that arises in the making of legislation like this is that there is a transitional period. The purpose of this amendment is to try to allow for existing contracts. We have discussed already the number of new ground leases that have been created. I think whichever way we look at it the fact is that there have been a large number of contracts entered into. Whether we talk in terms of hundreds or thousands does not really matter. The fact is that there are a number of people at the moment who in the past 12 months have entered into an agreement to purchase leases. It is a very common practice when a person is building a house, on the one hand, to enter into an agreement to get a lease and, on the other hand, to enter into a building contract with the builder who is building the house. Ultimately one gets the transfer of the lease itself and one's house is completed.

In the provisions of this Bill as it stands, we will have a situation in which the lease which one has agreed to buy will be a void lease. In those circumstances if one has a contract in which the consideration is actually void and therefore non-existent, I do not think that contract is enforceable. This is a moot legal point but I am afraid that it would not be legally enforceable. Again we have the situation where the tenants will suffer serious hardship because, in the first instance, he will have a contract for a lease that is void which, when this Bill is passed, will be an unenforceable contract. On the other hand, he will have paid the builder and he will be in the course of erecting a house on this site. This difficulty would be easily overcome without affecting the purpose or policy of the Bill by the adoption of this amendment. I would urge the Minister to accept it.

If we are to have any finality in this matter I must oppose this amendment on the basis that the public and everybody interested in this whole area have had more than ample notice of the matter. It was 15 months ago when Senator Cooney, as Minister for Justice, introduced his Bill incorporating this principle. Prior to that there were plenty of statements by the former Minister for Justice of his intention to bring in this legislation. To put it in ordinary terms, everybody has known for a number of years that this legislation was contemplated. There has been a piece of legislation, that is, the Minister's previous Bill, on view for 15 months.

If people concerned, lawyers, conveyancers, builders, developers and purchasers, do not have an appreciation of what is involved at this stage then it is very hard to help them. I will not help them to the extent proposed here. It is proposed that a lease made after the enactment of this Bill would not be void if it was made pursuant to a contract. That situation would give rise to a lot of uncertainty. Some leases would not be void and others would be void. There would be a distinction drawn between leases that were pursuant to contract prior to the enactment and leases that were not so pursuant. There would be two types of situations running for some time after the enactment.

As far as any legislation is concerned, provided there is an ample degree of publicity attendant on the publication of the legislation, it is important to have a cut-off point or a watershed in regard to its application. This particular legislation has had much publicity and has been kicked around in public debate and there is literally no excuse for anybody being in any doubt as to what is involved. It should be firmly in everybody's mind that after the enactment of this legislation there is a total voiding of all leases. If we start making exemptions or exceptions in respect of leases based on contracts entered into prior to the enactment of the legislation, then there would be a state of confusion and uncertainty and people would not be aware of where they stood. It is much better in legislation of this kind to have a single cut-off point, particularly when there has been more than ample discussion. There is very little excuse for people not being fully aware of precisely what is upon them.

The only thing I can say in relation to that is perhaps we are wasting our time discussing this here at all today if this is the attitude that the Minister is going to adopt on Committee Stage of a Bill of this nature in this House.

If the Senator reads his Order Paper he will see we are meeting a number of amendments later. He should not make imputations which are not based on fact.

I accept there are two amendments. I am talking about what we are doing here today. We put what I think is a reasonable case before the Minister and the only answer he gives is that because this legislation has been in existence in its proposed form for some months there is absolutely no change to be made in this respect. This is an amendment which is reasoned and does not fly in the face of the policy of the Bill. I know that it is a presumption in law that everybody knows the law. The Minister now proposes that there is a presumption not only in law but among ordinary people before a Bill becomes law that it is known. The fact is that there are contracts entered into by people before the passing of this Act which will not be completed on the passing of the Act and those people will be in a very invidious position. I have discussed this with colleagues and with developers and I know that lawyers are generally concerned about this. It is a problem that will not arrive on their plate for a year or two until somebody, a builder, who has entered into an arrangement with somebody, sees an option for getting out because the lease he was going to give is void and therefore there is no consideration. The person who has already started his house cannot, in the first place, acquire the fee simple because he does not come within the early provisions of the Bill, and in the second place, cannot even get a lease because the contract under which he is getting the lease is rendered unenforceable.

The amendment is perfectly reasonable. I do not see that it will cause any difficulty to anybody. It is simply to allow for this transitional period. I would have no objection if the Minister cared to put a 12 month limitation during which this provision or amendment would operate. I feel very strongly about this and I do not see any reason why the Minister should not accept it.

The Bill makes certain leases void. Our amendment is designed to save parties who would have entered into a contract before the Act to take such a lease, but would not have the matter completed before the Act was passed. It is to enable a lease then to be granted to that person on foot of that contract. If I am a proposed lessee and I want to build my house and I have a contract with a builder who contracts to give me a lease and before he gives me that lease the Act becomes law, I cannot then take that lease from him as I contracted to do because I would be getting something that would be worthless. I could go to my builder and tell him that this Act was passed, that the lease he proposed to give me and our contract are no good to me and that I want him to give me the fee simple. The builder might very well look at me and look at the site and he could say that he will give me the fee simple if I pay him an extra £5,000 or he may want the site back. He could ask for another £20,000.

This is the reality of the situation and this is a type of situation that we want to cure by this amendment. I would respectfully urge on the Minister that, for the sake of achieving finality as he argued, he would be doing a grave injustice to what could be a substantial number of people. If there are a substantial number of people then the situation demands to be remedied. These people are entitled to be protected by a transitional period as suggested in the amendment. If there are only a small number of people affected the Minister's argument falls down there too because the finality he is looking for will, in effect, come and there will be only a very small number of leases made pursuant to an agreement before the Act became law. I would respectfully urge on the Minister that if he does not accept the amendment he will leave this unknown number of people, who have contracted to take leases before the passing of the Act but have not got the leases before the passing of the Act, in a position where the builders or the proposed lessors can tell these people to go and take a run and jump for themselves, that if they do not want to take a void lease they have no intention of giving them the fee simple except on their terms or maybe not at all.

The Minister says that we would have the difficult position that we would have leases made before the Act. We cannot have any leases made after the Act because they would be void. The only other type of lease we can have is a lease made after the Act pursuant to a contract made before the Act. If there are a large number of them they are entitled to be protected. If there are only a handful of them they will not cause any conveyancing difficulty. I would respectfully urge the Minister to accept this amendment to protect this particular group of people who are very vulnerable.

I will look into that between now and Report Stage. It might be possible on the basis of a time limitation.

I would be apprehensive about time limits because, while we here are fully cognisant of what is going on in the proposed legislation, this is not the sort of thing that commands a wide public audience.

Amendment, by leave, withdrawn.

I move amendment No. 3:

In subsection (4), page 2, line 33 after "subsection (1)" to insert "or subsection (3)".

In fairness, this amendment was put in because we were not entirely sure as to the consequences of void leases and so on. Under section 2 (1) any lease created, the lessee of which would have the right to acquire a fee simple under the 1967 Act, is prohibited. Under subsection (4) that person whose lease is rendered void under subsection (1) is given the right to acquire the fee simple. Under subsection (3) a different type of lease is rendered void, a lease made after the passing of the Act on which there is no building. Subsection (3) provides that when a building is erected on this the lease becomes void. Nowhere in the Bill does it appear that the person whose lease is rendered void under subsection (3) is given the right to acquire the fee simple. A person whose lease is void under subsection (1) is given the right under subsection (4). The amendment we propose is to try to solve that. In fairness I should ask the question first.

I think Senator Molony has made the point that we are worried about this amendment. Perhaps the Minister would be able to clarify the position for us.

I see some merit in the type of case envisaged in subsection (4); that is why we have introduced it there. Candidly, I do not see any merit here because this is a case where the purchaser has built the house on the land thus making the lease void and what is suggested here is that the lessee should be enabled to acquire the fee simple and any intermediate interest at the expense of the lessor. This is a case where the lessee has entered into the transaction with his eyes open. Is that not the situation?

Not necessarily.

The law is the law and he enters into the transaction with his eyes open.

He takes a long lease of vacant land. There are no restrictions on what he is to do with it. He decides to put a dwelling house on it and he may also decide to put a business premises on it but there is no restriction as to what he does with it. But by putting a dwelling house on it, by virtue of subsection (3) his lease becomes void.

But he knows that. Subsection (3) is now law. The Senator is talking about when it is law and postulates the situation that will arise, as the Senator put it. He does this with his eyes open in the knowledge of the existence of section 2 (3) and of what it will mean in legislation.

It seems to us totally wrong that a person could take a lease of land before the passage, or even after the passing of the Act, without any restrictions or covenants as to how it is to be used. He decides to use this valuable piece of land by putting a dwelling house on it: it enhances the land and perhaps enhances the area contributing to the economic wellbeing of the country, taking people off the dole queues building houses, something the Minister would find attractive, and he ends up having a void lease. It seems harsh. What is the point of the subsection? Why is it inserted there at all?

Subsection (4) as it stands deals with an entirely different situation.

It does.

It is a different situation that I see merit in. That is why it is here.

But it is subsection (3) we are dealing with.

What is the point of subsection (3)?

It sets out the point that really is related to the amendment the two Senators have put down:

The construction of permanent buildings for use wholly or principally as a dwelling on land which is held under a lease made after the passing of this Act shall render the lease void if the existence of the buildings, as so constructed, immediately before the making of the lease would have rendered the lease void under subsection (1).

It is putting this case back into the subsection (1) category of voidability, where a dwelling is now erected on land subsequent to the passing of the Act. It covers the case of construction of dwellings on land subsequent to the passing of the Act rather than in the case where in subsection (1) you are dealing with dwellings. Here you are dealing with the construction of buildings on land subsequent to the Act.

I accept what the Minister says completely but I think there is a little bit of lacuna here somewhere. So that we may be absolutely clear on this, subsection (1), as I read it, provides for a situation where there is a lease of land with a dwelling house on it. Subsection (3) provides for a lease of land without a dwelling on it initially and goes on to say that in the event of there being a dwelling constructed on that land the lease on which the land is held becomes void. I would say that is fine if the building of the dwelling house was in contravention of a covenant or a condition in the lease. I would accept then that the person who flies in the face of a condition of his lease would have the problems associated with the nature of this provision. Say, for example, I lease a field or industrial site to the Minister for the purpose of the Minister erecting a factory on it. It is a 50 year lease and ten or 15 years later the Minister decides it would be prudent to have a foreman living on the property and he erected a dwelling house on that site. The erection of that dwelling house makes the entire lease void under subsection (3) and it seems that it is a ludicrous situation to allow that a perfectly normal commercial transaction is completely wrecked simply because a dwelling house was erected.

I would accept it if the Minister says that the reason a person whose lease is voided under subsection (3) is because he is flying in the face of his lease and going against what was intended when the lease was made. I would say: "Fine, that person should be penalised. He went into it and he must take the consequences of it." Where a person does it, and it is not in contravention of a condition of the lease and does it in the course of a perfectly normal transaction, it seems unfair that not only the lessee but the lessor is left without a lease. I can see this thing being the boast of the Bar Library. I could see dozens of very complicated actions appearing on the High Court list trying to sort out situations that would arise where a lease is voided under subsection (3) and no provision is made for what is to happen after the lease has been voided. The lessee is not given the right to acquire the fee simple and there is nothing laid down to provide what estate anybody is to have afterwards.

It is simply voided.

And everything reverts to the lessee?

In this situation it could only have been done by the lessee with his eyes open. The amendment which is suggested here envisages a case where the building could only have been erected and the lease created by the lessee or with his connivance.

Right, but look at the injustice that is going to ensue. Take the example I have given. Take a commercial transaction totally separate from any dwelling house development. I lease an industrial estate to somebody and after ten years that person who holds a lease for 99 or 50 years suddenly decides this lease was not a good idea and wants out. All he has to do is to erect something in the line of a dwelling house and everything is cut and finished with.

Or, on the other side of the coin, what is the position of a lessee who leases a plot of ground for commercial purposes and, as Senator Molony says, commercial purposes make it essential that somebody should reside on the premises, a foreman or caretaker, and a dwelling house is built for that person? The entire lease becomes void. It seems an awful consequence to build into the Act.

I would see merit in what the Senator is saying if he were dealing with an existing lease situation. What he is talking about here is a future situation and everybody is going to have warning from the passing of this Bill of the existence of section 2 (3). So it will be known. If you are to have any reality in the whole voiding operation of the oreation of future ground rent leases, surely you could not allow a gap of this kind to continue to exist?

Why not have the consequence in this subsection that you have in subsection (1)? The purpose of the Bill is to avoid the creation of future ground rents and this subsection obviously wants to close a back way of doing it. It closes a back door but buries everybody in doing so. Why not preserve the principle of preventing the creation of future ground rents by declaring that the lease becomes void if a dwelling is put on the land but, instead of the parties being put in that prejudiced position, let them then be entitled to have the fee simple?

It is quite obvious that we are agreed that if subsection (3) was not there you would have an obvious way of avoiding subsection (1) which is the main implementing section of the legislation. Therefore, some section on the lines of subsection 3 is imperative to deal with the creation of future ground rent leases in regard to dwellings on land that is at the moment vacant of dwellings. I think that is quite clear. I would see merit if what the Senators are suggesting we should try to avoid and what they allege is hardship, applied to existing cases. But we are not talking about existing cases; we are talking about virgin land at the present time and in the future on which dwellings may be erected subsequent to the Bill. I think it is essential to have the subsection as it stands because, as Senator Cooney says, it closes the back door. We close the front door in subsection (1); we close the back door in subsection (3). If you impinge on subsection (3) in any way, it will leave the way open to complete avoidance of the whole principle of the Bill. Candidly, once the Bill is law the Incorporated Law Society have assured me that they will give ample publicity to it. Legal advisers and solicitors throughout the country will be circulated and will know the situation. It has got adequate publicity already, and certainly if people get into the sort of situation mentioned by Senators Molony and Cooney in the future, that is just their bad luck. We are either bringing in this legislation or we are not.

Once we have subsection (1) agreed on as a policy matter to prohibit the creation of future ground rents it would be very foolhardy, to put it mildly, to allow a situation to exist that would not be covered by the position envisaged under subsection (3), allowing for a very substantial means of evading the whole policy and principle of the Bill as set out in subsection (1) of section 2.

The Minister must understand that we approve of the inclusion of subsection (3) completely. We do not suggest in any way that it be removed. Our amendment in fact to extend it so as in some way to clarify the position of somebody whose lease is voided under subsection (3). I accept that there is a difficulty here. On the one hand, you have the person who builds a dwelling house in contravention of a condition or the intention and thereby would get the right to acquire the fee simple. That, in effect, would be the effect of our amendment, and I do not suggest that our amendment is perfectly drafted. I see the other point—the commercial point—as being even more difficult. The fact is that somebody could get out of their obligations under a commercial lease by building a dwelling house. If a normal commercial lease is created for the erection of a factory and the tenant is dissatisfied and feels that he has had a bad deal, or for one reason or another would like to get out of that lease, all he has to do to get out of it, is to erect any sort of dwelling house on the land and the lease is automatically voided. It seems to be wrong that this provision could be used in that way.

In the latter case, is the Senator envisaging the construction of a house in contravention of a covenant?

Not necessarily. Take a simple situation where A leases an industrial site to B. There is no reference in the lease, good, bad or indifferent to the erection of a dwelling house but the intention of both parties is one to lease and the other to take a lease of the site on which a factory is to be built. That factory is built and it is going hunkydory for a few years. At some stage, the tenant or the lessee decides that he wants out. If he is familiar with the law as the Minister suggests everyone will be, he will simply look at subsection 3 and say "If I want to get out my lease I can render this lease void by the erection of a dwelling house on this site". It seems to me to be wrong that this provision could be abused in that way, but as it stands it can be abused in that way.

I shall certainly have that examined, because if that is the case it will obviously be undersirable. I can have a look at it between now and Report Stage.

I am grateful. One other point I would like to make in relation to this. I accept what the Minister has said in relation to the desirability of having a section like subsection (3) but I would suggest that where somebody innocently builds a house they should have the right to acquire a fee simple. I would suggest that the drafting difficulty could be overcome if one said that——

It is very hard to draft innocence.

Impossible, I would think, but I would suggest that where you are talking about a building lease or a non-commercial one, where a vacant plot of land is issued, you provide that somebody who builds a house that is not in contravention of a covenant in the lease, be entitled to acquire the fee simple. I can see innocent situations developing in which one or other parties to a lease are going to be upset unfairly and unintentionally. It is just one of the ramifications of a difficult piece of legislation like this.

I have not much sympathy on that point, because the law will be the law at that stage. I will certainly look into the previous point made by the Senator. I see some validity in it where one was selling a lease for commercial property and that was all that was in the party's mind at the time of the transaction and where it would subsequently give rise to a situation where a dwelling was erected and the erection of that dwelling could in effect void the original lease itself, which was for a non-dwelling house purpose. I certainly see merit in that, but on the second point I do not, honestly, because, as I have said, the law will be the law. At that stage, it is up to people not to be entering innocently into arrangements that run counter to the plain meaning of the section.

I think that in the circumstances we would agree to withdraw that amendment but we shall rethink the second problem we raised. We may be able to make some progress on that.

Amendment, by leave, withdrawn.

I move amendment No. 4:

In subsection (5), page 3, to delete lines 1 to 19, inclusive, and substitute:

"(5) (a) Where immediately before the passing of this Act a person holds land under a lease for a term of not less than ninety-nine years such person shall on obtaining permission for the erection of dwellings under Part IV of the Local Government (Planning and Development) Act, 1963 (including permission granted on an outline application under regulations made under section 25 of that Act) have the right to acquire under the Act of 1967 the fee simple in the land and any intermediate interests therein provided however that the permission hereinbefore referred to shall have been sought at a date when, at least 10 years of the lease are unexpired."

Subsection (5) provides that before the passing of the Act a person has land for 99 years with at least 50 years unexpired and at that time— that is before the passing of the Act —has a planning permission, he will then for one year after the passing of the Act have the right to acquire the fee simple under the 1967 Act.

We think that, as framed, this subsection could work hardship on people holding plots of land who do not comply with these very strict conditions. We cannot see reasons for imposing these conditions and narrowing the benefit of the section to people who comply with the conditions. Our amendment seeks to change the subsection so that it will read that when a person holds land under a lease before the Act for a term of not less than 99 years—the term of the lease whenever granted was for 99 years—"such person shall, on obtaining planning permission...". That is a change from the Bill which says that the planning permission must be in existence at the date of the passing of the Act. We envisage a situation where a person could have land under a 99 year lease; perhaps it has been in the family for some time but planning permission was not obtained for it. We feel that whenever planning permission is obtained for it that land should then be capable of being developed in accordance with the planning permission and that the lease could be translated into a fee simple under the provisions of the 1967 Act because as drafted if person A has land adjacent to a town in 1978 but services and development have not reached that land and the question of planning permission consequently never arose, but with the passage of time the adjoining town develops, that land comes into the category of building land and there is pressure for its development. It would appear to me from reading the Bill as drafted that that land can never be developed for dwellings because the lease cannot be compulsorily turned into a fee simple so as to give a good title to a person who might want to build a house. Provided the lease is a 99-year lease and that planning permission is got, then at any stage after planning permission is obtained it should be possible for the owner of that land to acquire compulsorily the fee simple. At present a person with land of that category can acquire the fee simple only if his lease is 99 years, if 50 years of that is unexpired and if he has planning permission for development. He may then acquire the fee simple within one year from the passing of the Act. That seems very restrictive.

Around every town and village in Ireland I am sure there are plots of land held on long leases, possibly from old landlords. Lots held in fee simple have not come under the Land Commission but there are substantial areas around many towns which would be held on long leases from the old landlords and which could be prejudiced in years to come because at the moment they have not planning permission nor is there any need to get planning permission because the land at present is development land. It will be unfair to those owners and will inhibit development of those villages and towns if the Bill is passed with the subsection as drafted. Consequently we say that Bill should be changed to provide that a lease that originally was for 99 years will have at least 10 years to run—that is an arbitrary figure—and that at any time when planning permission is obtained for dwellings the owner of the land—the lessee—would be entitled to acquire the fee simple so that that land could become developed.

In order to assess the amendment it is important to go back to the meaning of the section which first of all is designed to be of only one year's duration after the enactment of the Bill, as it is quite clear that it is dealing with a transient situation. The section is designed to give relief to a builder who at the time of the enactment of the legislation is engaged in residential development of land which either is held by him on a long lease or in respect of which he has an enforceable agreement for a lease. The provision enables such a builder who is in the course of this development at present acquire the fee simple in the land and any intermediate interest during the period of one year after the Bill becomes law; of course planning permission must exist in that case. The Bill provides that for a builder who holds under lease at least 50 years should be unexpired under the lease. That is narrowed down by Senator Cooney's amendment to 10 years. In the Dáil on Committee Stage, we brought in the 50 years provision as an official amendment because of very strong representations from the Parliamentary Committee of the Incorporated Law Society that a term of least 50 years was necessary in order to secure the finance for the housing and development envisaged. It is in response to their representations and on the basis of enabling this type of current development to proceed and that the lease should have at least a 50-year unexpired period for financial reasons that we brought in the section as it now framed and was amended in the Dáil. It is in ease of current building development and designed for that purpose only. I think it would be unwise to narrow the section down to what Senator Cooney suggests.

To widen it.

To widen it rather, I mean to narrow down the period and to widen the section.

I am not fussy about the period. Fifty years is fair enough if the Minister says so but the question of entitlement to a reversionary lease will probably cure that. The Minister's example deals with the builder who has land and who has planning permission. It gives him a year to get his house in order. That is fine, but what I have in mind is land that has not reached the builder's hands and is still in the hands of the original land-owner. That land is on the outskirts of a town but development has not reached it yet.

The section is not designed to meet that case at all.

The section is designed to meet the case of a builder as the Minister has exemplified, but that is all it is designed to meet. Now take the case of the landowner on the fringe or the outskirts of a developing town or village who holds his property under lease for 999 years from the local landlord. In three years' time his land may come under pressure and people may want to buy sites from him. As I read the Bill as drafted, by virtue of section 2 (1) he will be unable to make a sub-lease to a person of a building site; that sub-lease would be void. That person, in order to avoid the consequences of subsection 1, should be entitled to acquire compulsorily the fee simple on getting planning permission to develop his land. I am looking ahead five, ten or even 15 years hence when land comes under development pressure.

That is not really an amendment of what is here. It is a new concept.

It is not. It is expanding the concept that is there. The concept that is there is to prevent injustice to the builder exemplified by the Minister. I want to prevent that injustice, not merely to that builder who is already at the stage of planning permission and who is geared to go, but to other persons who own land not yet subject to development pressure but who inevitably will be subject to that pressure in years to come. If that person's title is a long lease from an old estate he, technically speaking as I read section 2 (1), cannot grant a sublease because it would be void, and there is no way in which he can compel the lessor to grant him the fee simple. One could say that the lessor would get a small rent for a 999 year lease and that surely it would be reasonable to sell the fee simple, but if the lessor is aware of development pressures in the background that could alter his thinking.

The sort of case mentioned by the Senator would have to be met in the context of the legislation by the person owning the development land. The person, the company or whoever is concerned would have to make their own arrangements, their own deals and their own contracts. I do not see how we can at this stage legislate ahead for that purpose. All that is envisaged here is a very modest notion, not to do any harm to the existing builder who is currently developing such land. That is why it is restricted to 12 months.

To start making provision for the holders of such development land at present, who have virgin land that may be development land for housing or other developments in the years ahead would be introducing a completely new concept. It would be going beyond the bounds of practicality as well as good legislation in the present Bill. I do not think either Senator Cooney as Minister or the present Minister would envisage extending the legislation to that future area. After 12 months, which prevents the current builders from being prejudiced, all are on their own in the knowledge that the legislation is there for all to see, and all are free to make their own contracts in the knowledge of the law as it will exist at that time.

The type of person whom I have exemplified is not there on his own. His position has been changed by virtue of this legislation. If he holds under a long lease the only way he can sell building sites is by way of sub-lease. This legislation makes those sub-leases void, or they will be when a building is erected on them. This legislation is prejudicing that sort of person and is effectively totally inhibiting the development of his land in years to come for residential purposes. I am not seeking to introduce a new concept; I am seeking to introduce something which will relieve that person of the consequences of the new concept being introduced by this Bill. That person at present has a lease for 999 years and he can sell sites without any restriction by way of sub-lease for 990 years or 900 years. That is the law at the moment. This Bill proposes to prevent that person from granting such leases. If we put that person in that position we must consider the hardship being caused to him and decide to give him the right to acquire compulsorily the fee simple.

The only trouble about Senator Cooney's suggestion is that again he is going against the whole policy of the Bill. The Bill is being introduced to render void, and by so doing to prevent by statute the creation of future ground rent leaseholds or long leases with ground rent. Everybody appears to agree that that is the principle. As I said earlier, I had doubts 11 years ago as to whether it could be done or not. It is agreed now that this should be done. Everybody pays lip-service to it. There is not much point in making a proposal of the kind enshrined in Senator Cooney's amendment, which seeks to help people who may wish to create such ground rents.

No. My point is to save innocent people from the consequences of the Bill.

That is the same point.

Take, for example, a landowner whose land has been in his family's possession for generations. His title, instead of being a fee simple, is a long lease, say a fee farm grant, which is a common enough type of title on the outskirts of towns, or a lease for 999 years. That is the type of title this landowner has and there is nothing he can do about it; he is stuck with it. His land is close to a town or village and in five years' time there is pressure on him to sell sites. By the change being made in the law we are effectively prohibiting him from selling sites because he cannot give a title, he can only sell by way of sub-lease.

With respect, I think the Minister is hanging his hat, or perhaps his net, too strongly on the idea of a new concept. It is not necessarily a new concept. What we are talking about here in both the original subsection and in the amendment is somebody who holds land under a lease. We are talking of a situation where he is going to develop it. If he develops that land and does not have the right to acquire the fee simple, he is not in a position that he cannot sell off the site. He can, but instead of him getting the fee simple and giving it, every individual to whom he gives a site will have to get the fee simple and the complications are multiplied. The only way he can give land is to assign or sub-lease. As he sub-leases, every sub-lease is void under this Act, and every sub-lessee has the right to acquire the fee simple under this Bill. The purpose of the original subsection was to enable that person to get the fee simple and to convey sites to people as opposed to sub-leasing to those people.

I do not see any new concept in this. The only difference here is that there is a restriction that a person must have planning permission now, but he can take three or four years to get planning permission for some big housing estates, between the comings and goings and appeals and so on. If somebody holds land under a lease and he proposes to develop that land and if the local authority propose to give him planning permission, then it is perfectly good sense that that person once he has planning permission should have the right to acquire the fee simple and give fee simple sites to people rather than sub-leases. When individual tenants get sub-leases they will automatically get the right to acquire the fee simple and there will be a multiplicity of applications.

Again, I ask the Minister whether that sub-lessee has automatically the right to acquire the fee simple under section 2 (3).

Section 2 (3) is designed to meet the case of the present land, virgin land on which a dwelling is subsequently erected.

And that voids the lease.

That voids the lease.

Am I to understand that if I have a farm and decide, after the passing of this legislation, to lease land to people for the purpose of building houses, that I cannot do so?

We are talking about ground rents.

I accept that. I have 100 acres which I hold under a lease. The effect of subsection (3) and also of our amendment is that if I cannot acquire the fee simple through some ordinary method and I do not have the right to acquire it, I cannot develop that land because I cannot give sub-leases and I cannot give a fee simple that I do not possess. Therefore, the effect would be to sterilise vast land banks.

No. Forgive me if I turn this round. We are back to the point on which Senators opened up the Committee Stage debate, to section 1 and the enormous flexibility that exists in the forms of legal estate that are outside the scope of this Bill and which can be created by lawyers after agreement is reached between A and B in regard to what interest or estate they create in their land. They can consult their lawyers and their conveyancers and deals can be made outside the scope of this Bill.

Is that what the Minister envisages?

(Interruptions.)

We are going on reverse paths here. That sort of situation would arise where somebody owned in fee simple and wanted to escape through one of the loopholes in the Act. What we are talking about is a person who does not own a fee simple but who owns by way of long lease or fee farm grant. The only way that that person can sell his site is by way of sub-lease.

That need not necessarily——

That, as the Minister says, will make nonsense of the Bill.

That is precisely the point on which the two Senators opened up. I have always held that view. That is why we reached accord so easily on the definition section. I am being totally honest in this. Due to pressures and political parties and politicians this Bill is before us. I am on record 11 years ago making the same point as I am making now. I resisted bringing in this Bill 11 years ago.

So it is a totally meaningless Bill?

I am not saying it is meaningless. It is going to catch a large percentage of long lease rents that have been created and I think are not going to be created again by reason of this. If any housing development of the kind mentioned is needed in the case of people owning estates in land suitable for housing development that are not fee simple estates—this was a case mentioned in regard to fee farm grant type property or other long lease property that is not in the fee simple category—arrangements can be made legally to ensure that development of that land can take place. I have no doubt that any number of forms of estate or interest in such land or arrangement can be made between the owner, developer and buyer that are not comprehended by what is envisaged by section 1. All that is envisaged by section 1 is that this Bill relates to the specific definitions in the 1958 Act and in the 1967 Act. It is limited there and flows from there. I do not claim any more or any less for this Bill than just that.

The Minister is being very fair, but we have three choices at this stage. One, we can acknowledge the fact that land held under long leases or fee farm grants is sterilised so far as development is concerned.

No, I did not say that.

There are three options. That was the first one. Two, to get over that option you can encourage people to go around the provisions of this Bill and actually pay lawyers to devise methods and means by which they can flout the policy and purpose of this Bill. If that happens those methods by which they are trying to get around it will not be confined to cases in which there are existing problems and existing long leases. They will also apply in the cases which the policy of the Bill is trying to protect. The third choice is to accept this amendment which will solve the problem completely and will make no difference to the overall intention of either the policy of the Bill or the technicalities involved in conveyancing itself. I urge the Minister to accept it on that ground.

That is it in a nutshell. I endorse what Senator Molony has said. Again, take the example of the person who has 50 acres held under a 999 year lease on the outskirts of a town. At the moment if he wants to sell a site he can do so only if he finds some way that avoids the Bill and uses one of these loopholes which were talked about earlier. With all the consequences that flow from that, as Senator Molony outlined, the whole Bill is going to be avoided and the policy decision, which the Minister has argued so strongly for here, will be set at naught.

I am not accepting the amendment.

Amendment put.
The Committee divided: Tá, 16; Níl, 21.

  • Blennerhassett, John.
  • Burke, Liam.
  • Butler, Pierce.
  • Connaughton, Paul.
  • Cooney, Patrick Mark.
  • FitzGerald, Alexis.
  • Governey, Desmond.
  • Harte, John.
  • Howard, Michael.
  • Kilbride, Thomas.
  • Lyons, Michael Dalgan.
  • McAuliffe, Timothy.
  • McCartin, John Joseph.
  • Markey, Bernard.
  • Molony, David.
  • O'Brien, Andy.

Níl

  • Brennan, Séamus.
  • Cassidy, Eileen.
  • Conroy, Richard.
  • Cranitch, Mícheál.
  • de Brún, Séamus.
  • Donnelly, Michael Patrick.
  • Ellis, John.
  • Goulding, Lady.
  • Hanafin, Des.
  • Harney, Mary.
  • Herbert, Anthony.
  • Hillery, Brian.
  • Honan, Tras.
  • Hyland, Liam.
  • Jago, R. Valentine.
  • Kitt, Michael.
  • Lanigan, Michael.
  • McGowan, Patrick.
  • Mulcahy, Noel William.
  • Ryan, Eoin.
  • Ryan, William.
Tellers: Tá, Senators W. Ryan and Brennan; Níl, Senators Harte and Burke.
Amendment declared lost.

I move amendment No. 5:

In subsection (5) (b), page 3, line 22 after "case" to add "but in the event of disagreement on the price the same shall be fixed by the Circuit Court on the application of either party".

This amendment relates to section 2 (5) (b). Paragraph (b) says that part of the 1967 Act which relates to the fixing of the price of a compulsorily acquired fee simple shall not apply in the case of compulsorily acquired fee simple under the subsection of the Bill now before the House. We put down this amendment to deal with the situation that appeared to us might arise, that in the exclusion of the maximum purchase price there could be an area of unresolved dispute and the amendment was to enable that dispute to be resolved by the Circuit Court.

My only objection to this amendment is that it is unnecessary. As Senator Cooney suggested, we have the provision of referral to section 18 (1) (b) of the 1967 Act, and we have also section 17 (1) of the 1967 Act, and I quote:

If any dispute, question or difficulty arises in regard to the purchase price ... any person concerned may apply to the county registrar for the area in which the land ... is situate to have the matter determined by his arbitration....

If he appeals to the Circuit Court against any decision of the county registrar, that is covered by section 22 of the 1967 Act. Senator Cooney's point is met by the provisions of the 1967 Act where the county registrar acts as arbitrator and there is a right to appeal to the Circuit Court which Senator Cooney seeks to import here. The point he is seeking to get at in this amendment is made by a reference to the 1967 Act.

There is provision for arbitrating on the price and the Minister confirmed that the price has to be fixed without reference to the formula contained for calculating the yield on Government securities, that complicated formula contained in section 81 (b) so that the county registrar can fix, subject to the matters he has to give consideration to under section 18, any price he feels proper.

The Senator's recollection is correct. That is the position.

That would give the county registrar very wide powers. Even taking the criteria of section 18, other than section 1 (b), into account, he could fix, and might have to fix, a very high price. Perhaps the Minister would give some thought to the constitutionality of the exercise of such a power by a non-judicial person between now and Report Stage.

I will certainly give consideration to it. The purpose of the county registrar is to ensure an expeditious arbitration to remove any delays. The Senator's point is relevant having regard to the recent decision of the Supreme Court.

Amendment, by leave, withdrawn.

An Leas-Chathaoirleach

Amendments Nos. 6 and 12 are related. Amendments Nos. 7, 8, 9 and 10—in so far as it refers to assignment—are consequential on No. 6. Therefore all these amendments should be discussed together.

I move amendment No. 6:

In subsection (7) (a), page 3, line 29 after "sublease" to insert "or assignment".

I understand amendment No. 12 is being taken with this.

Perhaps that would expedite matters. Amendment No. 12 is an official amendment to meet a valid point of view expressed by Senators Cooney and Molony in amendments Nos.6, 7, 8 and 9. These amendments relate to the situation that would exist on assignment. The lacuna is obvious when one reads the Bill closely. It does not cover assignments as it now stands, and the Senators put down these amendments with a view to closing that gap in the legislation. I regard their points as valid. We have taken the draftsman's advice on this and I would suggest that amendment No. 12 meets that point of view in so far as it refers to assignments, and it is designed to cater for the point relating to assignments. We feel it does that in the best drafting manner. The point of principle involved in the Senator's amendments was met. The same point was also made by the Incorporated Law Society, and I think it covers an obvious lacuna in the legislation. It should cover assignments and refer to the personal representatives or successors of title of assignees also.

Amendment, by leave, withdrawn.
Amendments Nos. 7, 8 and 9 not moved.

An Leas-Chathaoirleach

We now move to amendment No. 10, in so far as it refers to cases where agreement has not been reached.

I move amendment No. 10:

In subsection (7) (c) (ii), page 3, line 45 after "sublease" to add "or assignment and in default of agreement as decided by the Circuit Court on the application of either party".

The point being made by Senators in this amendment merits attention and is valid. For that reason we have Government amendment No. 11 to meet the point. As the Bill stands, there is a lacuna where a lease is rendered void but a sub-lease is not rendered void in the circumstances covered by subsection (7). The Bill provides that the sub-lessee shall, from the date of the voidance, hold the land demised to him at the rent reserved by the sub-lease, or such portion of the rent reserved by the voided lease as is fairly attributable to the land comprised in the sub-lease, whichever is the greater. The provision, however, does not say how the portion of the rent reserved by the voided lease that is fairly attributable to the land comprised in the sub-lease is to be determined where the lessor and the sub-lessee cannot agree on an amount.

Amendment No. 10 proposes that in these circumstances the amount of the rent should be decided by the Circuit Court on the application of either party. That is considered the best and most appropriate course in the context of other provisions of the Bill, to have the amount of the rent determined by arbitration as suggested. We have already discussed that aspect, and subject to the point as already made by Senator Cooney, I think it meets the matter.

An Leas-Chathaoirleach

The House is, in fact, discussing amendments Nos. 10 and 11 which are related.

In view of the question of the constitutionality of the county registrar exercising what we think might be a judicial function, would it be better if both amendments were left open for Report Stage, until the latter could be looked into? The only difference between us is that we suggest the Circuit Court should be the arbitrator while the Minister's amendment proposes that the county registrar should.

The only reason I went for the county registrar procedure is that it is already there and it is more convenient to refer to legislation already there. I would prefer Senators to give me the section as it is because the constitutional point is one of more general application. I do not think we should hold up the passage of this Bill pending that. That is a separate matter. I am not going to push for Report Stage today because two valid matters were raised by the Senators which I feel should be looked at between now and Report Stage. If we stay with the existing legislation and with the arbitration procedure that is written into the 1967 Act I think it makes sense. I suggest that the constitutional aspect is another day's work.

I accept what the Minister says and perhaps the ultimate solution will lie in the amendment of section 17 of the 1967 Act.

Perhaps it would be better that way. As the Minister has undertaken to look into this matter, I am satisfied.

Amendment, by leave, withdrawn.
Government amendment No. 11:
In page 3, between lines 45 and 46, to insert:
"(8) Where a dispute arises in regard to the apportionment of the rent under subsection (7) (c) (ii), the matter shall be determined under section 17 of the Act of 1967 (which refers to the determination of certain matters by arbitration)."
Amendment agreed to.
Government amendment No. 12:
In page 3, between lines 45 and 46, to insert:
"(9) In subsection (7), references to a sublease or sublessee include, where appropriate, references to an assignment and to an assignee, his personal representatives and successors in title."
Amendment agreed to.
Section 2, as amended, agreed to.
Section 3 agreed to.
SECTION 4.

I move amendment No. 13:

In subsection (1), page 4, to delete all words after the word "dwelling" in line 29.

I put down this amendment to enable a point to be raised. I would be glad to have the Minister's view on it. Originally I was of opinion, for the reasons advanced in the Report of the Landlord and Tenant Commission of April 1968, that local authority houses, by reason of certain considerations attaching to them, should be excluded from the scope of this legislation. The Government consider that was wrong and have made the point that they are now bringing local authority dwellings within the scope of the Bill. That is not quite correct. Local authority dwellings are being brought in in a restricted way and the rights attaching to local authority dwellings are not as great or as full as the rights being given to other lessees. What is sought here is a political compromise, to be able to say to local authority dwellers "We are bringing you in" without telling them at the same time "We are bringing you in as second-class citizens".

If the Government have decided that local authority dwellings should come in, it is my view that they should come in entirely and on exactly the same footing as other lessees. It is a view I disagree with but the Government by reason of force majeur are able to enforce their will and implement that particular policy decision. That policy decision, having been taken, should be implemented fully and no compromise should be allowed. The Government should be quite open and honest with local authority tenants and tell them that they are not being taken in and put on exactly the same footing as other citizens, that they are being taken in and put in a special second-class category of their own. The purpose of this amendment is to put it to the Government that this is what they should do to fulfil what they have promised and have said to local authority tenants they are doing for them, that they are bringing them into this Bill and putting them on the same footing as all other tenants. That is the point of this amendment.

I see the point of the amendment but I do think the Senator is being a bit schizophrenic and showing split personality political thinking. On the one hand he does not agree with the principle of owners of local authority houses who were tenants but are now being given the right under this section to buy out the ground rent. He opposes what he did in principle in his own Bill and he said so on the Second Stage of this Bill in this House—that he did not agree with the principle of selling these houses. He adopted the attitude of being opposed to it on the basis that this would mean that these houses would pass from public control and that that was undesirable. He said before that he thought it was undesirable in the course of preparation of his own Bill, and said so here on the Second Reading. How can he square that attitude with the amendment here that seeks to delete some measure of control which we are bringing into the matter to meet the point which was made by Senator Cooney? It is a classical case of trying to have your cake and eat it.

I want the Minister to explain why he is not putting local authority tenants on the same footing as everybody else.

For the same good reason which motivated Senator Cooney in deleting them altogether and for the reason which he expressed himself here on the Second Stage, that it would be undesirable to remove these houses entirely from public control when they have been built out of public funds. What we suggested is that the consent of the local authority should be required for a period of 25 years from the date of the sale of the house. This is, as the House is well aware, a provision designed to ensure that houses built out of public funds shall be available to the category of people that would qualify for them and to no other category. It is designed to prevent the abuses in regard to the disposal of houses built by public funds to people who would not be entitled to housing from public funds. It is designed to ensure that public funds are used only for the housing of people who should have been entitled to the transfer of such houses but were not enabled to purchase the house because of a total freedom of disposal existing in an ex-tenant owner who decides to dispose of his or her house at a market price to anybody and in particular to people outside the qualifications for public housing.

The Senator is well aware that that is the position. That is the whole purpose of having the provision of 25 years after the date of purchase written in here within which it would be required of the fee simple owner to secure the consent of the local authority to the disposal of the house. That is the motivation behind what is here and it is precisely the same motivation that Senator Cooney had in excluding them altogether. We feel that it is a much better way of approaching it to include them but at the same time to safeguard the public interest in the manner I have mentioned. It is much more rational and logical. It is certainly highly split reasoning for Senator Cooney to advocate, on the one hand, that they should not be included in the general ambit of the Bill, and, on the other hand, to suggest that the residual measure of control that I have mentioned should be removed and that they should have total control in this matter. What we are seeking to do here is to achieve a very sensible balance in the matter between the public interest and the social interest involved in giving the owner of a local authority house in this situation his or her rights under the Bill.

An Leas-Chathaoirleach

Is the amendment withdrawn?

As the Minister has made it quite clear that local authority tenants are in a different position, I withdraw the amendment.

Amendment, by leave, withdrawn.
Section 4 agreed to.
Section 5 agreed to.
TITLE.
Question proposed: "That the Title be the Title to the Bill."

There is no great objection to it because we all know that is what it means but in terms of drafting it seems odd to write into the Title, especially the Long Title of the Bill, the term "ground rents" when the whole difficulty that we have had here in this Bill has been the impossibility of defining ground rents. We are writing into the Title of the Bill a term which is impossible of legal definition. We all know what it means but at the same time there is a bit of inconsistency. The Long Title might be better phrased as an Act to prevent the creation of new leases of dwellings because that is in effect what it is doing.

I see a lot of sense in what the Senator is saying but the fact of the matter is that, while ground rents may not be, as he says, a legal term, they have become a highly emotive term and I suppose if that is what the people understand by legislation it is better to have it in. It is better to have legislation more understandable than legal.

Question put and agreed to.
Bill reported with amendments.

An Leas-Chathaoirleach

Next Stage?

In two weeks' time.

I would like it to be taken in two weeks' time because I saw some adverse criticism from outside parties of the delay in this legislation being processed. It was suggested that vested interests were holding it up. The Second Stage concluded on 8 February and our amendments were circulated on 27 February, and I would like to put on record that there was no delay on this side of the House in advancing this legislation.

I would like to join Senator Cooney on that. Definitely there has not been any delay and the matter has been expedited on both sides of the House.

I think what the Senator said is not quite in accordance with the position. I think we have been ready to go on with these amendments since the 27 February.

It is my understanding that there was one delay at the request of Senator Cooney but perhaps my information is not correct.

Report Stage ordered for Wednesday, 3 May 1978.
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